Peabody Energy, the nation’s largest coal company, recently filed for Chapter 11 bankruptcy protection. This is a significant, symbolic shift in the nation’s energy landscape. One question that corporate accountants, finance professionals and strategists might be asking - were there signs of this in the company’s facing financials?
The answer is yes.
idaciti’s Decision Categories include “Predict Bankruptcy.” (If you don’t know what Decision
Categories are, start here.) It includes several KPIs like the Altman Z score, retained earnings, market capitalization and more. Together, these paint a portrait of company liabilities and distress. But the real insight into Peabody Energy lies in its working capital and revenue. Look at the data here:
In 2015, their working capital plummeted a rate far faster than revenue. Working capital is a measure of both a company's efficiency and its short-term financial health. Working capital is calculated as: Working Capital = Current Assets - Current Liabilities. A negative value (over $5 billion) indicates liabilities that far outweigh assets, inefficiency, and short-term problems. Such a precipitous plummet also indicates dire consequences for the life of the business.
Perhaps another large story is the general decline of working capital over time. This may indicate a fall in the value of Peabody’s assets like its mines and their coal.
How do other companies stack up in this examination? With an analytical platform like idaciti, it’s easy to see company distress that could be disastrous. And when you’re evaluating competitors, vendors, sales prospects or acquisitions, that evaluation could make all the difference.